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The Chairman’s Report A Message from Lawrence F. Flick, IV, Chairman and Chief Executive Officer Prudential Fox & Roach, REALTORS® and The Trident GroupFALL/WINTER 2011 REGIONAL EDITION: SOUTHEASTERN PENNSYLVANIA Has There Ever Been a Better Time? There is a time for everything, including buying a Analytics and Local Market Monitor, independently home. But how do you know if the time is right for predict that house prices will decline anywhere from you? Your answers to the following questions can help 0 to 2% in 2012 before beginning to rise in 2013 and determine if the timing is good for you: 2014. We might then wonder, if that occurs wouldn’t it be better to just wait until next year before buying • Would a different home better meet your needs a home? under your present personal circumstances? • Do you feel secure in your job? Forecast Change in House Prices • Would you like the security of a long term Southeastern PA investment? Year Moody’s Local Market • Do you like to save money? Analytics Monitor • Would you like more control over your future? 2012 0 -2% 2013 +7% 0 If you answered mostly “yes,” then the time to buy a 2014 +7% +3% home is now. In fact, there has never been a better time to buy than now. Low house prices and the lowest Well, yes, and no. Home prices are bumping along the mortgage rates since the 1950’s have converged to create bottom. Yes, they may go down a bit more, so if we an unprecedented opportunity. could be certain that mortgage interest rates would stay at the extreme lows we see now, then yes, theoretically it You may have heard the forecasts that prices could erode might make sense to wait. But, and this is an important a bit more next year. Two industry sources, Moody’s 1

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consideration, we have not seen mortgage rates this low Think of it this way: do the potential savings of an since the 1950’s! As our economy improves — and it interest rate that is 1% below what it might be in the will — rates will go up as well. If they rise by 1% from future exceed a potential 2% decrease in the price of a what they are now, they would still be considered low, house? That may sound complicated, but let’s do the but not the historic lows they are now. Understanding math: In 2010, a survey by the National Association of the risk of waiting is essential to a thoughtful decision, Realtors® concluded that the average length of time we because today’s record low interest rates mean keep our homes has risen from seven to eight years. appreciably lower monthly payments. Not just for This increase is attributable to the trend of consumers now, but with each mortgage payment made month viewing housing as more of a long term investment. after month, year after year. In fact, the survey revealed that most first time buyers plan to stay in their home for ten years, and repeat buyers expect to remain 15 years. For our comparison, let’s assume that a buyer stays in the house eight years and that prices drop 2% next year. All three price points in the table below show the savings a homebuyer would enjoy over time by locking in at today’s historically low rate. Cost Savings Comparison Price Mortgage 1% interest 2% price of house amount savings over depreciation So, the question is: Do we wait and take a chance on 8 years perhaps getting a lower price on a house next year, or $249,750 $200,000 $11,520 $ 4,995 do we buy now and lock in at today’s interest rates and $375,000 $300,000 $17,088 $ 7,500 pay lower monthly payments for the long haul? $500,000 $400,000 $22,752 $10,000 …today’s record low interest rates mean appreciably lower monthly payments. Not just for now, but with each mortgage payment made month after month, year after year.2

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While many predict that prices may decline next year then level off and gradually increase, no one assumes they will rise dramatically in the next several years.No one can really know that a market has hit bottom getting the top price for your home if you sell now,until after it has occurred, but I believe the risk of home you will be more than compensated as you “buy up.”prices coming down more than moderately is very It’s possible to realize a significant savings from theslight. Even if they decline a percent or two, any combination of great pricing and low interest rates,additional minor price erosion pales in comparison buying a home that would have been unattainableto the disadvantages of an increase in interest rates. before and reaping the advantages of extremely lowPerhaps the best thing about making a move now interest rates for the life of your new mortgage.rather than waiting for another year is that you canbegin living in a home that genuinely meets your If you are selling your home, pricing and condition arecurrent needs and desires sooner than later. of the utmost importance. As a sales associate told me recently, she compares houses on the market toA Time for Selling? contestants in a beauty pageant! Yours needs to be the best in order to win the crown, or should I say to winJust as there is a time for buying, there is a time for over a potential buyer.selling. If you’d like to sell your current home and buya new one, how would you answer the following? Is this the right time for you?• Would a different home better meet your needs Take a few moments to answer the questions above under your present personal circumstances? and then decide if this is the right time for you. To• Do you feel secure in your job? make the most thoughtful and well-researched decision,• If you are moving to a larger or more expensive home, please contact your Prudential Fox & Roach sales would you like to save money? associate and Trident mortgage consultant for information• Would you like more control over your future? that will address your specific needs and circumstances.• Have you been in your current property for more I wish you all the best! than five years?Again, if you answered mostly “yes,” it is a good time tosell your house, especially if you are “trading up.”Doesn’t it make sense for sellers to hold off until pricesbegin to rise? While many predict that prices maydecline next year then level off and gradually increase, Lawrence F. Flick, IVno one assumes they will rise dramatically in the next Chairman and Chief Executive Officerseveral years. And, though you may believe you are not Prudential Fox & Roach, Realtors® and The Trident Group Perhaps the best thing about making a move now rather than waiting another year is that you can begin living in a home that truly meets your current needs and desires sooner than later. 3

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AN INDEPENDENT VIEW Kevin C. Gillen, Ph.D. is a the average home has fallen in value by only Research Fellow with nine percent, according to the Federal Housing University of Pennsylvania’s Finance Agency (FHFA); less than a third of the Institute for Urban Research national decline. and a Vice-President with Philadelphia-based Econsult Of course, price deflation puts homeowners Corporation. His quarterly underwater: owing more money on their mortgages report on the Philadelphia than what their houses are currently worth. Currently, housing market regularly about a quarter of all U.S. homeowners are in such a receives widespread media situation, according to research by Zillow. In our coverage, and he has been area, only about eight percent of homeowners are in quoted in the Wall Street Journal, the NY Times, the such a situation. Not only is this significantly less Philadelphia Inquirer and Philadelphia Magazine. than the national average, but only three states (NY, OK and ND) can claim a lower percentage of As an economist who writes and speaks frequently negative equity than us. about our region’s housing market, I’m asked if I could deliver some good news for a change. I often Where there is negative equity, there are foreclosures. respond with, “Sure: the good news is that the bad According to RealtyTrac, one in every 570 American news is a lot worse everywhere else!” households received a foreclosure notice last month. In the hard-hit Sunbelt states of California, Nevada, Outside of our area, the typical U.S. home has Arizona and Florida, the number is one in every 242 depreciated in value by more than 30 percent since households. In our area? Only one in every 1,166 the bursting of the housing bubble, according to households received a foreclosure notice last month. Case-Shiller’s 20-City composite house price index. Even in the hardest-hit county of Philadelphia, the That is a larger decline than what was even seen number is one in every 800 housing units; still well during the Great Depression. But here in our area, above the national average. An Independently Owned and Operated Member of the Prudential Real Estate Affiliates, Inc.4